Sunday, January 29, 2012

Mr. Ferran Soriano is the author of the book "Goal: the ball doesn't go in by chance (management ideas from the world of football)." Soriano was some years ago the Chief Financial Officer of FC Barcelona, while the club was in one of the successful waves that Barça has experienced. Soriano was then relatively young, probably below his 40 (he was born in 1967). In the book, he unashamedly took a good deal of credit from some of the success on the pitch. Before his spell in the club, an even younger Soriano had sold his stake in a Telecommunications Consulting company, Cluster, just before the dot com bubble imploded. After his spell in Barça, in 2009 a group of businessmen and politicans in Catalonia chose Ferran Soriano as the chairman on Spanair, after SAS sold its controlling stake. Just two days ago Spanair suspended all the flights due to the disastrous situation of the company. Soriano has declared that the economic crisis and bad luck are to blame, and that he did all his best to save the company in very difficult times. To me, it is one of the clearest examples of the tendency of humans to take credit for good outcomes and export blame for bad outcomes, when outcomes depend both on actions and on random or uncontrolled factors. Of course the disaster also illustrates how not to undertake industrial policy, and how a wrong interpretation of the word "competitiveness" can end up costing a lot to both users and taxpayers. By the way, just some days prior to the airline announcement, newspapers published the rumour that Soriano was being considered for a high executive position at Manchester City. Good news for United, and I don't mean the airline.

Friday, January 27, 2012

Thanks to the colleagues in the UAB Foundation program Study Abroad, I am teaching a course in "The Economics of Soccer". Teaching is learning, so I'm reading all the bibliography that I can. The class presentations can be followed from somewhere in my chaotic web page. I will be updating them. There are many fascinating issues. One of them is how long does success last, for example in the case of Barça. If one is a reader of the sports newspapers in Barcelona, it would seem that we are just living the beginning of an eternal era of success. However, a bit of rational thinking would make us more cautious, and realize that a combination of factors should conspire to trigger the beginning of a decline at some point. First there is the realization that luck plays an important role in soccer, and therefore reversion to the mean should apply in this field as in any other where radomness plays some role. Second, there is overconfidence: success reduces the defences against hypertrophic egos, diminishing motivation and pushing players and managers towards spending more time and energies in self-promotion and pet activities (or not so pet, but distracting nevertheless, such as becoming a celebrity or dating a celebrity). Finally, the rivals also exist, and they learn how to stop the leader and how to imitate it (although loss aversion from behavioral economics suggests that managers are biased against offensive tactics). Or perhaps the sports press is right: the youth academy in Barça will keep producing world stars (and Messi, Xavi and Iniesta are not just a lucky coincidence). Would it be the first time that the popular press is right and the scientific literature is wrong?

Monday, January 16, 2012

Watch this movie: "Moneyball". And read the book with the same name, which was written by Michael Lewis and published in 2004. The main character in the movie is interpreted by Brad Pitt in the role of the general manager of the Baseball team of the Oakland Athletics. The movie and the book tell the true story of how this general manager embraced the theories of statisticians and (behavioral) economists that were approaching baseball with more rigorous eyes that had been usual until the 1990s. In particular, the movie and the book show how the transfer market was completely inefficient because it was dominated by the prejudices and gut feeling of a caste of ignorant decision makers. You don't need to understand anything about baseball to grasp the profound message of this story. It is actually the old story about the revolutionaries against the conservatives, and how difficult it is to break with the past when there are powerful interests. The movie and the book were recently praised in an article in the Financial Times by Simon Kuper, probably the best sports journalist in the world, and co-author (with Stefan Scymanski) of the book Soccernomics.

Friday, January 6, 2012

The financial crisis and the appointment of technocratic governments in Greece and Italy are good reasons to think about academic research on the role of experts in economic policy and in decision making in general. The recent book by Daniel Kahneman, “Thinking, Fast and Slow,” mentions the issue and keeps a balanced view between the pro-experts attitude of legal scholar (and Obama’s regulatory czar) Cass Sunstein (also, author with Richard Thaler of “Nudge,” one of the Bibles of behavioral economics) and the anti-experts attitude of social psychologist Paul Slovic. In an interview in the Time magazine, Kahneman argues that experts are useful for some tasks and useless for others, where the aggregation of independent information or independent views by lay persons is more useful. Dani Rodrikviews technocratic governments or agencies as a wrong solution to what he calls the globalization “trilema,” by which currently it is incompatible to try to keep three things simultaneously: national democracies, welfare states and global integrated markets. He argues that it is better to stop global integration if we do not manage to build a global democracy. Legal scholar Avishalom Tor, from the University of Haifa, has a couple of papers on behavioral antitrust (on entry and resale price maintenance) where the most interesting thing is the survey he makes of the literature on behavioral biases of experts, managers and teams in microeconomic decisions. The (former?) chairman of the Federal Trade Commission in the US, William Kovacic, has a theoretical paper with a co-author on the behavioral biases of regulators, arguing that these biases push regulatory decisions closer to those of a politicized decision maker.

The economists Landier and Thesmar have a wonderful book in French on the difficulties of government policies, and they have there a chapter ridiculing the role of experts, showing funny quotations from General De Gaulle and others on the issue. The solution they give is similar to the one advocated by the Danish social scientist Flyjbjerg in his book on the systematic planning errors in infrastructure projects: massive and systematic transparency, and allowing for public participation and education in democratic decision making. Finally, one of the references suggested by Landier and Thesmar is the classic book by Phillip Tetlock on the forecasting mistakes made by experts in politics and economics.